The Dangers of Targets

It would seem that last year's datagate cock up by HMRC, when they lost the personal data of 25 million people, was not just down to negligence but was also the result of Brown's management by target philosophy.

According to Merlin, The Earl of Erroll (an IT expert who is widely regarded as the only Lord with programming skills), datagate was "because of targets [and] budgets" rather than being the fault of individuals.

Lord Erroll noted, during a panel discussion at the Infosecurity security conference, that someone had to get the data somewhere else to meet a target. He added that having simple procedures doesn't work, if the only way to hit targets is to bypass those procedures.

Quote:

"We live in a complex world. The moment you try to use simple rules and controls, they don't work."

The data that was lost by HMRC should have had details, such as bank details, stripped out of the databases on the discs before they were sent to the National Audit Office. However, the data was left in as a result of costs savings targets.

A false economy by anyone's standards!

As long as Brown holds office, management by targets will continue.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

HMRC's Fairy Godmother

It's nice to see that those running HMRC believe in fairy tales.

Following on from sacking Adam Hart-Davis, as a result of his less than complimentary interview about HMRC, a new face to front HMRC has been found.

None other that "veteran" (I don't mean old) newsreader Moira Stewart.

Ms Stewart will make her TV comeback using the slogan:

"Tax needn't be taxing."

A variation on the old tag line "tax doesn't have to be taxing".

Appearing as a fairy godmother, she will tell taxpayers how to fill in tax forms.

Rather disconcertingly an HMRC spokesman said:

"We envisage her spearheading the campaign for some time.

Her relaxed manner will get people in order.

She has authority and a serious reputation."

"Get people in order!"???

I can't say that I care for the implications of that turn of phrase!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Tax Evasion vs Tax Avoidance - Clueless

How depressing to see that a tax "professional" doesn't seem to know the difference between tax "evasion" and tax "avoidance", and spends his time campaigning against avoidance.

"But in the real world the fact that there is no clear distinction between tax evasion and avoidance does matter. And it's this ability to see beyond the pointless argument on definition to the reality of life as it actually is that makes all the difference."

Source Richard Murphy.

I assume that he does not use his personal allowances?

Were he to do so that would be tax avoidance.

Even more depressing is the fact that:

-We are both members of the ICAEW (FCA's)

-We both qualified, not at the same time, at KPMG

-We both featured in Accountancy Age's 2006 Top 50 Financial Power list (he was 42nd, I was 11th)

Sadly the government uses people such as Richard Murphy to justify their increasingly hostile policy towards legitimate tax avoidance.

One more time, for Richard's benefit:

1 Tax avoidance (legitimately reducing your taxable income) is legal, it is tax evasion (hiding taxable income) that is illegal.

2 We all practice tax avoidance by the very fact that we use personal allowances, isa's, tax credits etc.

Tax avoidance is legal, tax evasion is illegal.

Is that clear?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Gordon's "Quick Fix"

Having introduced a 10p tax band a few years ago, that many believed did not actually help the poorest (who don't pay tax), Gordon Brown abolished it last year.

MP's in the Labour party, having realised that there are local elections coming next week, recently woke up to the implications of this well publicised abolition and have managed to pressure Brown into saying that he will try to ensure that those negatively impacted by it will be helped.

Needless to say, there will be a world of difference between what Brown is allowing his MPs to believe they think he has promised and what he actually does.

However, we can be assured of one thing, whatever "fix" he actually implements will involve a smorgasbord of complex tax credits, means tests and expensive adverts telling people that if they are affected they should apply for relief.

The net effect will be:

-The costs will outweigh the extra tax collected

-The taxpayer will be worse off

-HMRC will screw it up, as the tax and tax credit system is already far too complex and unwieldy to work effectively and efficiently

As long as Brown is in office, the tax system and HMRC will never be simplified and will never work as they should (ie be a cost effective, fair and efficient mechanism for collecting tax).

Brown doesn't do "simple".

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Customer Care

HMRC would have us believe that we are the "customer".

Hah!

As if we had a choice!

HMRC would have us believe that as a "customer" we can raise suggestions for improvement in their online filing service, and that they will take them on board.

Really?

Read this on AccountingWeb, including the comments, it would seem that for the last three years a perfectly sensible suggestion has been ignored by HMRC.

Who do they think that they are trying to kid, when they tell us that we are the "customer"?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Judge, Jury and Executioner

I am amused to see that the people running HMRC are fans of Judge Dredd; where Dredd is judge, jury and executioner.

It certainly seems that HMRC have taken this fantasy story as being a fact based model, on which to base their new modus operandi.

Under new penalty provisions, HMRC will set the level of fines for tax offenders and also decide the degree of fault.

That's nice!

I assume that it will help cut down on all that time wasting bureaucracy, whereby a third party would have to become involved in assessing guilt and determining the level of fine (if appropriate).

The new provisions (published on 1st of April - no joke!) will result in a penalty of up to

-30% of the tax due if the error is "careless";
-a penalty of up to 70% of the tax due if the error is "deliberate";
-and a penalty of up to 100% of the tax due if the error is "deliberate and the customer conceals it".

The new penalties will initially apply to errors on returns and documents for income tax, VAT, PAYE, national insurance, capital gains tax, corporation tax and the construction industry scheme.

They will kick in on return periods starting on or after 1 April 2008.

The sting in the tail with the new penalties is not just the level of penalty, but also the fact that HMRC will decide the degree of fault.

HMRC state that their benchmark of "reasonable care", when determining the seriousness of the "error", will vary according to the person involved, their circumstances and their abilities.

Somewhat subjective, don't you think?

Don't worry though; HMRC, like the Pope, is infallible (in its mind anyway).



Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Power Corrupts

The old adage "power corrupts" appears to have passed HMRC and Alistair Darling by, when they chose to ignore advice from the ICAEW about Darling's 442 page Finance Bill.

The Finance Bill gives HM Revenue & Customs more powers to raid businesses, without the need for a warrant.

The Institute of Chartered Accountants in England and Wales (ICAEW) is increasing its calls for a rethink after the Finance Bill, published yesterday, showed that its earlier advice had been ignored.

Advice to the ICAEW, this government (most especially the Treasury) doesn't listen!

The ICAEW stated that it is seriously concerned that the provisions "appear to be aimed primarily towards investigations of a 'criminal type' nature, as distinct from civil enquiries into a taxpayers' affairs."

The trouble stems from the fact that the "Revenue" side of HMRC is itching to attain the same powers as those enjoyed by Customs & Excise, before the ill fated merger in 2005.

The ICAEW notes that the provisions "give far too much power to HMRC without adequate safeguards for taxpayers".

Specifically:

-The power to enter business premises with only a day's notice
-The ability to mount 'fishing expeditions' by inspecting the position of a taxpayer before a return is made
-The right of HMRC to dictate record-keeping requirements

The ICAEW is concerned by the lack of safeguards, such as rights of appeal and the increasing tendency of HMRC to seek broad powers in primary legislation.

Given the government's track record, and the thirst by HMRC for new powers, it is unlikely that the ICAEW will get very far with its polite requests.

Nu Labour does not do "simplification of tax", and most certainly does not believe in "legislation lite".

HMRC has been politicised by this government, and is being used as the tool of government policy. It's actual role should be no more than that of an efficient, cost effective administrative function that collects tax.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

HMRC's Wonky Databases

HM Revenue & Customs (HMRC) has been having some problems with its databases.

No, I don't mean that embarrassing "little" incident last year when it lost the data records of 25M people.

Seemingly it has incorrectly taxed up to five million UK citizens.

A report by the National Audit Office (NAO) found that up to £880M in pay as you earn (Paye) taxes had not been collected each year, while other taxpayers had overpaid by up to £340M.

The NAO said in its report that IT systems were "not well suited to the efficient administration of income tax where people have more than one job or change jobs on a regular basis".

It added:

"These difficulties have been compounded by inconsistent working practices within the department as a consequence of staff not being aware of or failing to follow departmental procedures."

The NAO said problems stemmed from tax records being structured around jobs, rather than around taxpayers.

HMRC have admitted that its Paye systems have difficulty coping with people who have more than job. However, it has promised to fix the problem.

So that's alright then?

Errrmmmm...maybe not.

For you see, the solution that HMRC intend to implement is to move its processing from its 12 regional databases onto one single national database during 2008-09.

An HMRC spokesman said:

"This will bring together separate employments into a single customer record to create a single view of employees' tax affairs.

Our staff will have access to all of an employee's pay, tax, national insurance and pension information which will be all in one place. This will make our Paye processing quicker and more accurate."

A noble idea.

However, given their previous problems wrt merging/rationalising departments and the complete inability of any government orifice to handle IT issues in a professional and successful manner, does anyone seriously believe that the merging of 12 regional databases will work?

I guarnatee more records will be lost and muddled up during 2008/09.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com) is brought to you by www.kenfrost.com "The Living Brand"

HMRC on iPod

HMRC Is Shite is pleased to announce that it has added a new feature to the site, which enables users to listen to feeds on their iPod/iPhone.

When clicked, this button will trigger automatically the registration of the site's Odiogo feed in iTunes. From this point on, the audio files of the feed will be uploaded to the user's iPod/iPhone upon each iTunes synchronisation.

The menu bar to the right contains the link button.

Subscribe To HMRC Is Shite Podcast with iTunes

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

All Are Created Equal....

In his book "Animal Farm", Orwell wrote about how the pigs, once they had come to power, changed the rules of the game and introduced a new policy wrt equality:

"All animals are created equal, but some animals are more equal than others".

Clearly those in charge of HMRC are fans of Orwell, and have used the example set by the pigs in formulating their rules wrt expense receipts for taxpayers and HMRC staff (who are also taxpayers).

HMRC staff (all 83,000 of them) do not have to submit receipts to cover claims ranging from meals to hotel accommodation and travel, and are entitled to expenses without actually paying out any money.

They can claim £100 for an overnight stay in London, and £20 for an evening meal while working out of their office without handing in receipts.

When out of their offices for more than five hours, they are entitled to a £6.50 meal allowance and a two-meal allowance of £14 when away for more than 10 hours.

Night work or sleeping in offices on call or standby after a day's work is worth £7.60 a night, while sleeping in the office after working late provides £10.90 a night.

Drivers can claim 5p a mile for each passenger they carry, while passengers themselves are entitled to a similar 5p allowance even if they do not pay anything for the privilege.

Staff can also choose to stay with friends or relatives, rather than at a hotel when working away and can claim £25.

There is nothing wrong in principle with any of the above, it is perfectly correct that staff should be reimbursed for out of pocket costs. It is also perfectly reasonable, given the difficulty of obtaining receipts for some cost items, not to expect a full/auditable record of every penny spent to be maintained.

Fair enough!

Except that there is one small fly in HMRC's ointment.

Can you guess guess what that is?

Yes, that's right, the rules that apply to HMRC do not apply to the rest of us.

We are expected to provide receipts for all expenses claimed against taxable income.

Doesn't that strike you as being a little bit unfair?

The other rather interesting aspect of this matter is that HMRC have been trying to hide its expense policy from the taxpayers. It required UHY Hacker Young to use the Freedom of Information Act to discover details of the expenses regime.

Clive Gawthorpe, a UHY Hacker Young partner, is quoted in The Telegraph:

"Accountants who frequently face challenges over expenses for as little as £10 will find it ironic that HMRC runs such a liberal 'no questions asked' system for its own employees."

HMRC, according to Mr Gawthorpe, is also desperate to try to keep this policy secret from the rest of us and was urging its employees not to publicise rates and allowances.

Is this unfair?

In the eyes of HMRC it is perfectly fair, they believe that:

"All taxpayers are created equal, but some taxpayers are more equal than others."



Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Advertising Standards

My compliments to the taxpayer who recently advised of his bold attempt to raise a formal complaint with the Advertising Standards Authority (ASA) over the HMRC tag line:

"Tax doesn't have to be taxing."

He argued that it was misleading.

Regrettably ASA rejected his complaint.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Hoisted on Their Own Petard - HMRC Caught Lying

David Ross recounts a tale of woe on Accounting Web, where he tried to interact with one of HMRC's call centres.

It seems that HMRC are not only experts at losing data discs, but they also lose letters and records of phone calls.

I wonder how it is that they manager to keep track of people's tax records?

Having lost the record of the phone call, HMRC's staff (it would appear) were not allowed to ring their colleagues up to query the issue.

What happened to such concepts as "using one's initiative", "customer care" and "efficiency"?

HMRC know that they are in deep "sh*t", because their operatives will not pass on their work phone numbers to the taxpayers. That speaks volumes about their attitude, and the way that HMRC is run.

In fact, as the story unfolds, HMRC go on the attack and threaten the Mr Ross with action.

Why?

He recorded the call that HMRC claim never took place!

Like a cornered teenager/tantrum throwing toddler, HMRC kicks and squeals because it knows that it has been caught out.

Quote:

"We do have a slight concern about this case. I understand that you have recorded that call at no stage did you advise the adviser that you were recording the call.... You do realise that you have to do that...The adviser will now take further action"

"We do not have the slightest concern about this case"....!!

Are we taxpayers seriously going to tolerate this type of attitude from this organisation?

Read the full story below:

Summary of facts

We wrote a letter on 15 January 2008 to your "Service Office" containing an error/mistake claim on behalf of our client for 2004/5. On 13 March I telephoned your Call Centre and spoke to a lady who confirmed that the letter had been received. As the Call Centre cannot do anything, she said she would send a message to follow the matter up.

Today, 27 March, I telephoned again and the young chap said there was no record of the original letter or my previous call. What was more, since no message was on record to the Service Office, he was not allowed to ring them about it! So I asked if there was someone more senior who did have the authority to pick up the telephone to the Service Office, and I was transferred to you.

As you could not help any further I said I would check my telephone record, which would take a few minutes. Since you would not give me your telephone number, you rang me back after 20 minutes.

In the resumed conversation you again said there was no record of my call on 13 March, or receipt of the original letter. So I played you my recording, which confirmed the Christian name of the HMRC Employee and what she had said to me.

You said;

"I'm just looking up now and the person that you spoke to has made absolutely no notes at all on the record to verify that she has spoken to you - she has made absolutely no note to say that she has quantified (sic) that we have received the letter, because we haven't so I am going to have to trace the call"

After this I faxed you a copy of my original letter, asking that in the circumstances you ensure that it was dealt with immediately.

At this point I was pleased to have effectively represented my client's interests and to leave it at that. I supposed that the lady I spoke to on 13 March would get a 'slap on the wrist' and that my client's problem would be attended to.

However, you then took the trouble to telephone me back, not to confirm that you were dealing with the tax matter, but to tell ME off!

“We do have a slight concern about this case. I understand that you have recorded that call at no stage did you advise the adviser that you were recording the call …. You do realise that you have to do that …. The adviser will now take further action"

(which of course I invite her to do if she would like to have my formal Complaint by return – will my old Trade Union be getting involved?)

So here is what I think about what happened today – and I am sharing it (all names removed) with my colleagues via AccountingWeb.

I am very glad I had a recording of the conversation. You flatly denied the truthful version of events and failed to check your own records until hearing my recording obliged you to.

Without my record, I would have been left with egg on my face and my client would have suffered. I rang my client back on 13 March and told him of my successful contact with your office. When his error/mistake claim is processed to his Self Assessment Account, interest will be charged to that date, so we will be seeking compensation for the delay.

It is an absolute nonsense to threaten me with unspecified 'action' by an employee who was found out to have fallen down on the job, and who has no right to complain about the recording of a call that she knew was being recorded anyway!

All along I found your manner defensive and officious. You even denied that your office is a Call Centre – "this is a Tax Office". You said that lots of other accountants, like me, used to work in the Revenue and remember 'the good old days'.

For the record, I always voice my sympathy when speaking with your colleagues about the environment they work in and make it clear I understand they did not design things the way they are.

Also, for the record, I very much appreciate that when the Call Centre cannot deal with something and send a message to the Service Office, they are very good about calling back. On this occasion an individual made a mistake, but the general complaint of Accountants and the Public is not against the staff but the set-up of HMRC that the staff have to suffer too.

When asking me to send you a fax of my letter you said "I can't deal with it" (i.e. you would pass it on). So you ARE by your own admission a Call Centre, not a Tax Office in the traditional sense, so please stop causing arguments by denying it.

In the circumstances, since your Call Centre operative made no record of my call of 13 March, the fact that no one made a record of the original letter hardly seems evidence that you did not receive it! HMRC can hardly say to people, as you did to me, that you have not had correspondence, just because it has not been logged in, and I trust you will take a less defensive line in future conversations.

David Ross

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Delays

In the run up to the new tax year, there was a scramble by business owners keen to sell their businesses before the new Capital Gains Tax (CGT) took effect.

The sell off is somewhat at odds with Labour's oft repeated claim that they are "business friendly".

The stampede to sell was of such gargantuan proportions that it overwhelmed HMRC with applications for approval of sales before April 5. This backlog in applications for approval exposed many businesses to potential tax bills of millions of pounds.

To be eligible for the CGT rate of 10%, the sale must have been completed before April 5. However, businesses that had not received clearance from the Revenue before selling do not have any guarantee about how much tax they will have to pay. Thus they are exposed to the anti avoidance crackdown announced by the Chancellor in the Budget.

The Revenue (HMRC), in theory, should have processed clearance applications within 30 days of receipt. However, it can push back the time limit if it has any queries about the transaction.

Can you guess what happened?

Yes, that's right, there was a noticeable spike in questions being sent back by HMRC around Christmas. One accountant has described the quality of questions being raised by HMRC as being "absurd".

A cynic might conclude that HMRC were slowing down the process, so as to ensure that clearance was not given in time for the change of tax rate. Thus leaving the businesses exposed to further tax demands in the coming year, as HMRC and Brown desperately scrabble around for more cash (tax take) to fill the ever burgeoning budget deficit.

The risk of being delayed by the HMRC in this manner prompted many professional advisers to tell businesses to take the risk of a business not receiving clearance, and go ahead without it.

What a mess!

This is no way to run an efficient, effective and ethical tax collection system.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Rock Bottom Again!

Congratulations to the management of HMRC for "leading" the organisation to ever greater depths of failure and despair.

The FT reported last week that a stonking 75% of staff at HM Revenue & Customs (HMRC) feel that their working conditions have deteriorated in the past year.

In fact, 53% believe that it will be even worse in a year's time.

Only 15% of staff said that the the integration of Revenue and customs had been good for customers, while 50% said it had been bad.

Just after the merger 36% felt it was good for customers, against 18% who thought the opposite.

Well done the FT for reporting this, but I would venture to remind them that this site reported the very same survey on the 4th of March.

Nice though that the FT, and Accountancy Age that reported the FT story as well last week, remind everyone how bad things are in HMRCland.

The moral of this story is that if you want up to date news about HMRC, read this site first.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Cloud Cuckoo Land

In HMRC's world things are very different from the world in which you and I inhabit.

Indeed, some far more eminent accountants than myself have referred to HMRC as living in "cloud cuckoo land".

Why would they be so rude about HMRC?

Well, it seems that way back in April 2005 HMRC wrote a paper about tax. This being Britain, the details of this paper only came out last month under a Freedom of Information Act request.

Now at this stage I could make some pithy comments about why HMRC feels to need to try and hide what it does from the humble taxpayers, but I wont.

The paper covered details of HMRC's "tax gap" calculations, in which it split tax advisory work into three types: tax computations, tax planning and avoidance.

Then, having slaughtered a goat and looked at the entrails (HMRC claim that there was "detailed methodology"), HMRC concluded that:

"The result is that some 50% of total fees are earned from avoidance."

Using some extra "logic" they then concluded that for every £1 paid in avoidance advisory fees to an accountant, £10 is avoided in tax, total tax avoidance costs are in fact around £10BN.

At this stage I would remind you all again, what I have been "banging on about" for ages on this site:

Tax avoidance is perfectly LEGAL!

It is only Hartnett, HMRC and Brown who would try to have you believe otherwise.

The real scandal is that people have to waste money and time in trying to reduce their tax bill.

Would it not better for the taxpayers, HMRC, all of us in fact, if tax were made simpler?

That way complex/expensive tax advice would not be needed.

Would HMRC not save money by having less leg work to perform?

Would this not in fact save Brown money, and enable him to cut taxes?

I think it would.

However, as long as Brown is in government, simplifying the tax system is the last thing that will ever happen.

The phrase:

"When hell freezes over"

springs to mind.

However, I have digressed, there is another point to this story; it would seem that HMRC have got their figures wrong.

How surprising!

Grant Thornton's Mike Warburton said:

"We certainly do tax planning work, but we are not spending half our time doing schemes. They are living in cloud cuckoo land if that's their idea."

Deloitte partner John Cullinane said:

"None of the categories seem to pick up most of our advisory work on commercial transactions."

Oh dear, it would seem that HMRC have got it wrong...again!

I wonder how much time, energy and money was spent putting together their flawed paper?

Who will pay for it?

We will of course!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Paranoia

I am not alone in thinking that HMRC and Brown and his minions have something of an unhealthy obsession with tax avoidance (which is, as I keep repeating, perfectly legal).

The Institute of Chartered Accountants of Scotland (ICAS) also think that HMRC have lost the plot over this issue, in fact they use the word "paranoia" to describe the government's approach to tax avoidance.

ICAS recently issued a press release warning about the dangers of HMRC's/Brown's approach to tax avoidance, and the adverse effects it will have on business owners.

Now you know that things must be bad when a leading accountancy body, that has been around for well over a century, starts calling the government/HMRC paranoid!

Here is the press release in full:

"The Finance Bill provisions which give effect to Chancellor Alistair Darling's proposed new capital gains tax relief for entrepreneurs reflect Government paranoia about tax avoidance and could adversely affect thousands of business owners, according to The Institute of Chartered Accountants of Scotland (ICAS).

Donald Drysdale, Assistant Director of Taxation, said, “Entrepreneurs’ relief has been described as a partial replacement for business asset taper relief or a resurrected form of the old capital gains tax retirement relief - both of which were intended to help taxpayers disposing of favoured business assets.”

'In practice, the proposed new relief is much less readily available than either of those previous reliefs. Because of the narrow definition of qualifying disposal, the stringent test applied in determining trading status and the reintroduction of the rental test when considering associated disposals - for example, where a business and the premises from which it operates are in different ownership - there is much greater likelihood that these entrepreneurs will be denied relief because obscure technical tests are not satisfied.'

Stephen Taylor of Carters Accountants LLP and also a member of the ICAS Tax Committee, said,

'We are concerned that the proposals adversely affect taxpayers on a retrospective basis, since existing commercial arrangements that have been regarded as perfectly acceptable under the current taper relief rules will be penalised. We also believe it is unfair that employee shareholders and certain trustees will be denied relief.'

Calling for further reconsideration of the proposals, ICAS believes that the impact of capital gains tax would fall much more fairly on taxpayers if the legislation provided for a transitional period after 5 April 2008 during which a measure of taper relief would continue to be available, and if for all purposes of capital gains tax there was a rebasing of assets to a relatively recent date such as March 2002 so that inflationary gains accrued up to that date would not be taxed unfairly. "

My advice to Brown and HMRC, given this diagnosis of paranoia by a respected and leading institution, seek suitable treatment with all due haste.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Negative Spin

I have stated a number of times on this site my concern over the "subtle" negative spin being propagated by Hartnett, Brown and certain elements within HMRC over tax avoidance.

They would have us believe that tax avoidance is wrong, and bordering on being illegal. Hartnett et al are cunning in their campaign, they seek to highlight the multi million pound "aggressive" (their word) tax avoidance schemes practised by large companies and very wealthy individuals.

They know that this drip drip drip of negative publicity, because it only relates to the super wealthy and multi nationals, has the desired effect of persuading the ordinary taxpayer that tax avoidance is the tool of the rich and (human nature being what it is) should be aggressively resisted.

Now here is the problem:

1 Tax avoidance (legitimately reducing your taxable income) is legal, it is tax evasion (hiding taxable income) that is illegal.

2 We all practice tax avoidance by the very fact that we use personal allowances, isa's, tax credits etc.

Why then would Hartnett et al seek to create the false impression of illegality wrt avoidance?

Three reasons:

1 Brown is running out of money, he desperately needs to increase the tax take; cutting back on people's legal right to reduce tax, by making it more difficult for them to avoid tax and by slandering them, is an easy option.

2 HMRC et al are softening the rest of us up for reductions in tax allowances (personal allowances are already not in fact raised in line with inflation).

3 HMRC and Brown are softening us up for legislation that will make avoidance illegal.

Indeed, so effective has this drip drip drip of negative publicity been that even Tesco and The Guardian have been suckered into a fight over it.

Tesco is suing The Guardian over claims the paper made about its tax planning.

Tesco claims that the Guardian wrongly alleged that Tesco had set up a tax avoidance structure offshore to avoid paying up to £1BN in corporation tax, and that the supermarket had already avoided £500m in corporation tax using the structure.

It claims it has saved only £23M in stamp duty from the scheme, and could avoid a further £30M-£40M from the structure, again in stamp duty.

The paper said the claims were an attempt to "chill public debate" on tax avoidance issues.

The Guardian are quoted in Accountancy Age:

"We have never claimed Tesco behaved illegally. These are matters of considerable political importance at present, debated by all parties."

So we have here two large organisations, one legally using legitimate tax avoidance techniques the other reporting on those techniques and stating that they are not illegal.

Had Hartnett et al not been feeding the public misconceptions about tax avoidance there would be no story here and the Guardian would never have bothered to print it, and Tesco (had the Guardian printed this non story) would not be bothered about the Guardian printing it in the first place.

This is the direct consequence of the HMRC and government campaign to denigrate those that practice tax avoidance, and to imprgenate tax avoidance with the stench of disrepute.

As I have already said, all of us practice tax avoidance. Once HMRC, Hartnett and Brown have curtailed the legitimate activities of the large companies, they will come for the rest of us, who then will stand up for us?

"In Germany they came first for the Communists,
and I didn't speak up because I wasn't a Communist.
Then they came for the Jews,
and I didn't speak up because I wasn't a Jew.
Then they came for the trade unionists,
and I didn't speak up because I wasn't a trade unionist.
The they came for the Catholics,
and I didn't speak up because I was a Protestant.
Then they came for me,
and by that time no one was left to speak up."

Martin Niemoeller

To repeat:

Tax avoidance is legal, tax evasion is illegal.

HMRC want you to believe something else!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Infamy, Infamy, They've All Got It In For Me!

We all love a good conspiracy theory, that's part of the joys of being a human being.

Why should cock ups, bad luck, accidents etc be our fault when we can blame malign influences such as; MI6, Prince Philip, George Bush, little green men, BAA, leaves on the line etc etc?

Therefore it should come as no surprise to learn that HMRC, in the shape of its acting Chairman "The Nearly Man" Dave Hartnett, believes that HMRC has been the subject of a malign conspiracy.

The Nearly Man was talking at an ICAEW Tax Faculty event in March, and addressed the highly embarrassing subject (embarrassing to HMRC anyway) of the online tax filing system crash at the end of January which forced HMRC to extend its filing deadline by a day.

In Hartnett's view this was not an accident, most certainly it was not the fault of HMRC or its IT system.

The real cause?

Deliberate Conspiracy!

Seemingly, according to Hartnett, there had been a mysterious "spike" at 11.10pm on the night of Wednesday 30 January when a number of users had all come on to the system for a few seconds, but none actually filed.

Hartnett would not comment further on the issue, except to say that he would share details with the tax world when more was known.

Now it is possible that parties unknown attempted a Denial of Service (DOS) attack, by trying to overload the server, this does happen in the wonderful world of the web.

How many users came on line at that time?

Millions?

NO!

Hundreds of thousands?

NO!

To be precise, 6,500 people came online at that time.

I am prepared to believe many things in life, there are more things in heaven and earth etc. However, even if the 6,500 were evil doers, had the HMRC system been well designed it would not have fallen over because of a paltry 6,500 users being online at the same time.

Blaming this spike and an alleged conspiracy, in my view, is clutching at straws.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Guilty Until Proven Innocent

The fundamental problem that taxpayers face when dealing with HMRC, is the fact that the centuries old principle of British law "innocent until proven guilty" is turned on its head.

The onus falls on the taxpayers to prove his/her innocence when faced with an HMRC investigation.

Nick Morgan experienced such a "Kafkaesque nightmare" himself, and wrote about his experience in yesterday's Sunday Times.

Here is the "Director's Cut" of the article, as published on Nick's own blog at www.tax-hell.co.uk

Why do our elected representatives allow HMRC to turn centuries of jurisprudence on its head like this?

Why do we not vote for parliamentary candidates who would put a stop to this?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Happy New Tax Year!

Happy New Tax Year everyone!

I see that the start of the new tax year has been greeted by blizzards and heavy snowfall in most of the UK, an omen perhaps?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com) is brought to you by www.kenfrost.com "The Living Brand"

Waste

I received this message from a taxpayer, concerned about the time and money wasted by HMRC having to reallocate tax simply because a chnage of reference number had not been communicated.

"I paid some 2006/7 CT using Internet banking (this was the second year I paid electronically) and then received a reallocation notice from HMRC telling me that I overpaid 2005/6.

They had reallocated it to the correct year.

I made a telephone call and discovered that they change a couple of digits in the reference number each year to indicate the tax year that the payment applies to. I certainly wasn’t aware of this and it wasn’t obvious to me on the payment advice

I wonder how many other accounts have had to be reallocated?"

As he says, how many other accounts have had to be reallocated?

How much is this costing in terms of time and money (postage etc)?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com) is brought to you by www.kenfrost.com "The Living Brand"

Having a Laugh

It is refreshing to see that, despite their problems, HMRC does have a sense of humour.

I am advised that during the course of a tax enquiry into the affairs of a taxpayer, who paid CIS tax on all earnings, HMRC asked the source of a "suspicious" bank deposit in 2006 (Note, all other items had been cleared).

No prizes for guessing the source of this "suspicious" deposit.

Yes, that's right, it was a tax refund from the previous year's tax return (ie it came from HMRC)!

It was even supported by HMRC's own notification of tax repayment.

HMRC were just having a laugh, yes?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com) is brought to you by www.kenfrost.com "The Living Brand"

New URL

A number of you, including journalists, have told me that the URL of this site, www.hmrcisshite.com, sometimes causes problems when posting on chat boards and publishing in articles.

It would appear that the censors (both IT and human) don't like the word "shite".

Therefore to save their blushes I have added another URL, that can be used to access this site:

www.hmrconline.com

I would also remind you that the original, and most descriptive, URL www.hmrcisshite.com still works.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com) is brought to you by www.kenfrost.com "The Living Brand"